Patrick Gower interviews Trade Minister Tim Groser

Tim Groser says a legal challenge against future government ban on foreign property buyers can’t be ruled out under the
TPP but says the “real issue” is whether it could succeed.

“So what we’ll be doing over the next few days is ensuring that the legislation that governs these sorts of actions will
give future New Zealand governments the best possible defence against such attacks.”

Guarantees the TPP won’t make medicines more expensive in NZ, but “the one thing that could flow through here is through
slight changes in patent law”.

“What I think is clear is that any future finance minister and health minister, whoever she or he is, clearly has got to
make sure that there’s adequate funding taking account of these changes.”

Deal on dairy under the TPP “simply isn’t there yet” and that will be his most important focus in the next week.

“One is we’ve got to complete the market access negotiations, and they’re at a mature stage, but the issue on dairy,
which is our number one concern, is still very immature.”

Says other focus is “defensive issues” where “we will be holding our position”

Minister is “comfortable where we are” with investor-state dispute settlement clauses

Gower: Right, so to put it bluntly, can you guarantee, then, that corporations under the TPP won’t be able to
successfully sue the government here for regulating in the public interest?

Groser: Well, you can never guarantee what some errant judge is going to say. What I can guarantee you is that we will
deliver an agreement that gives the future Crown, under circumstances like that, the best possible way of defending New
Zealand government.

Patrick Gower: Trade ministers from the Asia-Pacific are flying into Hawaii for what’s being billed as the end game of
the negotiations for the controversial trans-Pacific trade deal. Critics say it will cede New Zealand sovereignty, but
proponents believe the deal could boost the economy by 2%. Trade Minister Tim Groser has meanwhile promised he’ll walk
away if the game’s not good enough, but will he? I spoke to him earlier in Maui and began by asking what he predicted
would come up while there.

Tim Groser: Well, we’re meant to be concluding this deal, after all these years of negotiation. So there are a few
things that are absolutely essential to us to get done. One is we’ve got to complete the market access negotiations, and
they’re at a mature stage, but the issue on dairy, which is our number one concern, is still very immature. So that’s
where I will be focusing most of my attention. And then there’s a series of what I call defensive issues, which will be
the subject of a public debate in New Zealand, where we will be holding our position and trying to get to a very clear
sensible result. So they would be the two main focuses for the team and me here.

Sure. Well, we will come back to dairy, Minister, but first, in terms of those defensive positions and concerns about
the TPP, one example raised this week by Labour was with the foreign buyers ban. Labour was saying that if we sign this
deal, the government here would be open to lawsuits if in the future it decides to put a ban in, and that even China –
even though it’s not in the TPP – could also sue us under it, because it has this preferred nations status. Could that
be possible, minister? Could that be possible under the TPP?

It could be possible under even existing FTAs we’ve got, Paddy, but there are a whole series of other measures. We have
to really define it in more precise terms, I think, than you and I can do on a television programme. I mean, there are
tax measures. We’ve just introduced measures to try and get a better handle on what foreigners are doing in terms of
residential property, and putting in requirements – they must have a tax resident’s number, that they’ve got to have New
Zealand bank account. So there are things that I think we could do, but an outright ban, no. We don’t want to put an
outright ban on foreigners buying residential real estate. It’s never been part of the political agenda. It’s just been
dreamed up in the last few weeks. It’s a political point. I don’t think it’s got anything to do with the trade
agreement.

Okay, okay, sure. But can you guarantee that under the TPP, New Zealand would maintain the right to restrict the sales
of farmland and of housing to non-resident foreign buyers. Can you guarantee that we would not face action under the TPP
if a future government did that?

Well, I could certainly guarantee the position with respect to farmland, sensitive land, land over five hectares,
because that’s been carefully preserved in all of our trade agreements, and it won’t be any different in TPP. With
respect to residential land, if a future government were – contrary to our intentions – wanting to move in a more
aggressive way in this, it would depend on how they did it. Can I give you a categorical guarantee that what I think
could emerge in TPP would rule this out – would rule out legal challenge? No, I can’t. And anyway, there’s always a
logical problem here. No matter how you construct either domestic or international law, you can’t stop somebody having a
crack at you. The real issue is whether they succeed. So what we’ll be doing over the next few days is ensuring that the
legislation that governs these sorts of actions will give future New Zealand governments the best possible defence
against such attacks.

Right. So those attacks could happen, effectively?

They could happen, yes. They could have happened in the past. They can happen in the future.

Moving on to another aspect that concerns people. That’s the investor-state dispute clause. That means companies can sue
governments if they introduce a policy that harms their business. Well, we’ve seen Germany being sued for shutting down
the nuclear power industry, Australia being sued by ‘Big Tobacco’ over plain packaging. Minister, why are we even
looking at a deal that includes these things?

Well, we’re looking at a deal that includes well-drafted – called ISDS – investor-state dispute settlement – clauses
which are very much along the model of the dispute settlement provisions that have been included by the previous Labour
Government in the China deal and in other deals, because we find them to have caused no problems for New Zealand. They
are well-drafted provisions. We’ve got experts advising us, and I’m certain that they will provide policy space for
future New Zealand governments to regulate in the public interests. The reason we’re there is because we also have got
concerns about our own investments overseas should they be subject to the processes that we think are really dodgy. So
it’s a two-way street, and I’m pretty comfortable where we are.

Right, so to put it bluntly, can you guarantee, then, that corporations under the TPP won’t be able to successfully sue
the government here for regulating in the public interest?

Well, you can never guarantee what some errant judge is going to say. What I can guarantee you is that we will deliver
an agreement that gives the future Crown, under circumstances like that, the best possible way of defending New Zealand
government. That’s the only guarantee you can give. What actually happens in result you can never guarantee that, even
under domestic law.

Okay, I want to talk now, Minister, about the impact on medicines – another guarantee I’m guessing I’m asking you for.
Can you guarantee to Kiwis that this trade deal won’t make drugs more expensive for them at the counter?

Yes, yes. Except in some completely trivial manner at some distant point in which somebody draws a long bow, yes, I can
guarantee that we’ve made it absolutely clear that we are not going to dismantle the fundamental of Pharmac. The
provisions that guarantee affordable medicines – we don’t want to change the system of health we’ve got in our country
so that people can get medicines only if they can afford it. We’ve got a very good system, and we’re not going to let
any trade agreement interfere with that.

Okay, so if the trade agreement does in a way somehow make pharmaceutical drugs more expensive, would the Government
then be prepared to give Pharmac more funding to cover any increase in costs to keep medicines affordable?

Oh, look, there’ll be always changes in this field, and there’s amazing things going on now in terms of biologics and
more conventional patented medicines. What I think is clear is that any future finance minister and health minister,
whoever she or he is, clearly has got to make sure that there’s adequate funding taking account of these changes, but I
don’t think you’re going to see anything dramatic, Paddy, that’s going to flow through as a consequence of TPP. But it’s
a moving game. It’s not something you can say is fixed for all time. This is something that the Minister of Finance, the
Minister of Health will always have to look at in terms of the adequacy of the budget they provide Pharmac.

So it could be that if costs of drugs increase because of TPP, the government would have to stump up more cash,
effectively, to keep prices down for Kiwi customers?

Well, the one thing that could flow through here is through slight changes in patent law. It's conceivable they could
flow through, though not in any dramatic way into pharmaceutical costs, and that would be a completely legitimate
question then to put to the two ministers and, therefore, the cabinet of whoever was the government of the day. But, I
mean, there's nothing specifically novel about TPP here. This is a question of rising pharmaceutical prices and rising
technologies put on the government any day, so it's not just related to TPP. But I think the one thing I can say is
that, in fact, at the end of the day, TPP is going to create wealth for this country. This is 40% of global GDP. We've
got to be part of this agreement, provided we can get a deal that makes net sense to New Zealand. We need to be able to
pay our way in the world, and if anyone thinks you can have a First World medical service without a First World economy,
they are just off the planet. So, fundamentally, this is part of the broader picture of ensuring that we remain a
competitive, outwardly engaged member of the global economy, and I'm very confident that this is going to be part of
that deal.

Okay, just quickly now on dairy – this is obviously supposed to be the upside for New Zealand, yet you said a few weeks
ago the agreement wasn’t good enough, and you’ll be focusing on that this week. Japan and Canada, as you know, both have
dairy tariffs of more than 200%, Minister. What would it need to come down to for us?

Well, dairy’s unquestionably, Paddy, the most important issue for us because it’s 25% of our export earnings. It’ll be a
bit light this year because of fallen dairy prices, but it’s typically around that. We’ve got very good deals shaping up
in the other areas, and the deal on dairy simply isn’t there yet. So this is the most important focus for me in the next
seven or eight days. We are looking for what we call commercially meaningful access. I’m not going to be dogmatic about
how to define that, but there’s nothing on the table yet that allows me to recommend to the cabinet that we should sign
this deal at this point. That’s for the next few days. It’s going to be hard yakka.

What would those tariffs have to come down to, though, in Japan and Canada that are currently at more than 200% in order
for this to be a realistic deal for New Zealand?

Well, the strange thing is, of course, that the further misaligned certain countries’ prices are from the world price,
the more competitive you can be over tariffs that really are quite high in other circumstances. So it’s not a question
you can just give a black-and-white answer to. This will be a subjective decision. We and my experts here will look at
it. I’ve got 15 people here. It’s a big team by New Zealand standards. We’ll look at it and then make a recommendation
at the end to the Government.

Okay, and final question, Minister. When will you be off to Washington as our next ambassador there?

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